KUALA LUMPUR – Malaysia dominates the global market for sukuk, or Islamic bonds, The Economist reported Friday. The country issued the world's first sovereign sukuk in 2002. In the first three quarters of 2012, it was responsible for almost three-quarters of total global issuance. Malaysia is also home to the Islamic Financial Services Board, an international standard-setting body. These are big achievements for a relatively small country of just 30m people, of whom only about 60 percent are Muslim. In neighboring Indonesia, which is home to the largest Muslim population in the world, only about 4 percent of the financial sector is Shariah-compliant. Although Gulf states and Saudi Arabia have bigger Islamic banks, it is Malaysia, said Iqbal Khan of Dubai's Fajr Capital investment fund, that is the center “for thought leadership in Islamic finance." Malaysia's Muslim heritage, outward-looking nature and links with financial hubs like Britain and Singapore made the place a natural candidate to bridge the worlds of religion and capitalism. The central bank, the Bank Negara Malaysia, is also supportive. Two institutions in particular, both set up by the central bank, have contributed to Malaysia's pre-eminence in the field. The first is the International Centre for Education in Islamic Finance (INCEIF). Established in 2005 and boasting about 2,000 students, INCEIF is the world's leading university for the study of Islamic finance. The International Shariah Research Academy, housed within INCEIF, brings together scholars to produce an internationally acceptable rule-book for Islamic finance. The second institution is the Islamic Banking and Finance Institute of Malaysia (IBFIM). It concentrates on vocational training, offering a variety of certificates in Islamic finance. IBFIM also acts as a consultancy to banks and firms that want to become sharia-compliant. Zeti Akhtar Aziz, the head of the central bank, said that these bodies are the “pipeline to provide the banks with talent". And not just in Malaysia. There are currently students from 80 countries at INCEIF; and IBFIM has taught people from Afghanistan, Nigeria, Palestine and elsewhere. There are more tangible benefits, too. The Islamic subsidiary of Maybank, a big local lender, already accounts for about half of the group's customers and is expanding abroad: it set up a subsidiary in Singapore 18 months ago and has also moved into Indonesia. Zeti said that Shariah-compliant banks are inherently more stable than conventional peers. Speculation is forbidden, and because charging interest is prohibited under Shariah law, returns are based on profit-sharing. — SG/Agencies
